Apple skipped over the 3G generation and added a 3.5G chip instead, which'll be capable of faster speeds than 3G and is capable of running the 2.5G, 3G, 3.5G. This also fits with the completely overlooked news that ATT upgraded their entire 3G network to the faster 3.5G. This could mean that we probably won't see another major iPhone revision until 2010 when 4G is brought mainstream, and when the iPhone is eventually out of its' exclusive ATT deal, so now is a better time to get one than ever.
This is definitely some really interesting, almost completely overlooked news. That just makes me even more excited to get an iPhone 3G. Should we call it the iPhone 3.5G ;)?